NEIL CAVUTO, HOST OF "YOUR WORLD": Well, forget soaring prices then. The president certainly in campaign mode, now warning Republicans that the budget cuts there could turn us into a Third World country.

Something tells me Mike Huckabee doesn't see things the same way. The governor of course has been early on concerned about this inflationary spiral that could take hold and complicates all their efforts, right?

MIKE HUCKABEE FORMER GOVERNOR, R-ARK.: This analogy that we're going to turn into a Third World country has to be one of the most absurd things that I have heard a sitting president say about the opposition party ever, even in the heart of a campaign, because let's remember what a Third World country is.

It's a country that lacks basic necessities, lacks basic infrastructure. Its economy is unstable. It has essentially no basic things that it can manufacture and make. And its people are all below the poverty line. Now, if we end up there, it ain't the Republicans who drove us into that ditch. That's absurd.

We have the highest standard of living. Do you realize that the average person living under the poverty line in America still has a cell phone, air conditioning, and an automobile, and -- and cable television? So, it's hardly fitting to say that we're going to be a Third World country.

I don't know -- that -- that is such hyperbole that it is beneath the president to say it.

CAVUTO: But clearly he's set his sights on these big cuts and wanting to rein them in.

I'm wondering though if both sides are going to see their options dramatically reduced, given an inflationary environment.

HUCKABEE: Well, that's probably going to happen.

But the founders of this country really were very smart in designing a nation that could not be changed very radically very rapidly. And they did that for a reason. They knew that, in the heat of any political moment, you don't want big decisions made that can change the long-term course of your country.

So they created this very complicated sort of process of government with three branches of government, two houses within the legislative branch. It's designed to move slowly. So, for all the talk...

CAVUTO: Congratulations. It is.

HUCKABEE: Oh, they are doing a great job of it.

CAVUTO: Right.

HUCKABEE: But it was never designed to move rapidly.

Now, was not designed to be in utter gridlock, which is basically where we are now. But you do not want every moment to have some very hot reaction to something that turns out maybe not to be so big.

But what is big is the long-term looming disaster, the train wreck that is coming, which is the deficit -- excuse me -- the debt and the deficits that we're running up every year. That is big. And that's something that we have to start steering differently for.

CAVUTO: Now, I know you do not like to talk about this. You said you have not made up your mind. You said maybe another couple of months about running for president or not.

So let me run a hypothetical. Let's say you do run for president. Let's say you become president and this...

(CROSSTALK) HUCKABEE: Wouldn't those be one and the same? Just -- just checking.

CAVUTO: Oh, as soon as you run, you become -- I like that. That's good. I like the confidence.

HUCKABEE: Yes.

(LAUGHTER) CAVUTO: But you're still facing these massive deficits...

HUCKABEE: Yes.

CAVUTO: ... that are presumably getting much, much worse. Would you advocate substantial cuts north of half-a-trillion dollars a year, the kind that Rand Paul and others have talked about? What would you advocate?

HUCKABEE: Well, I think you have to advocate some very strong cuts, but you also have to make sure that you are managing those cuts, so that it does not create huge holes for people.

For example, in the Medicaid program, I like Ryan's idea. Make this a block grant program. Give it back to the states. Let them create the flexibility. And I promise you it can be done, the same or greater level of services, for less money. That's possible.

It is also possible to take some of the Medicare proposals, raise the rate at which people get in. Now, Ryan said no one under 55 has any change. But should they have a change under 55? Yes. Why? Because people live longer. They're healthier at 65 than they were a generation ago. We keep saying that 60 is the new 40. OK. Well, let's treat 60 like it's the new 40. Let's raise that eligibility age up to 70 for the people under 55. Those are real savings.

CAVUTO: Well, you know the -- you know the mails you are going to get just after saying that here.

HUCKABEE: I understand that, but, you know, it's -- either we're honest with the people of this country and tell them that we can't -- it's the classic -- everybody wants to go to heaven.

CAVUTO: You just lost the 50- to 55-year-old vote.

(LAUGHTER)

HUCKABEE: Well, I'll tell you what.

CAVUTO: But, in other words, you would advocate very tough across- the-board cuts, but you wouldn't put a dollar figure to it, or you're waiting for your campaign?

HUCKABEE: I think -- well, I don't know about the campaign.

But I would certainly want to look into those dollar figures. Here's what I do know. You could cut 1 percent off the expenditures of the budget, and in 10 years, you've at least balanced the budget, if you've used 2008 as a baseline.

That doesn't sound like anything huge, 1 percent. Do you think all the government agencies could live on 1 percent less across-the-board, most...